Commentary | Trade and Globalization

Renewing ‘Made in the USA’

Opinion pieces and speeches by EPI staff and associates.


Renewing ‘Made in the USA’

By Susan Helper

Last month, another manufacturer announced that it was closing in my home state of Ohio, the 82nd in the past 12 months. This time it was Johnson Rubber, a 113-year-old maker of floor mats and rubber boots for steering columns.

Today’s Ohio Democratic primary has given these plant closings national attention, and both Hillary Clinton and Barack Obama have laid out plans for reviving manufacturing. But critics dismiss these efforts (as a Feb. 24 Post article noted) as pandering and ineffective.

Neither critique is fair. Yes, the manufacturing sector has been hammered with the loss of 3.7 million jobs over the past seven years. But manufacturing remains vital to our nation’s economy. One-tenth of all U.S. jobs are in the manufacturing sector — good jobs that pay 20 percent more than the national average. Manufacturing accounts for 12 percent of gross domestic product and over half of our national spending on research and development.

Continued hemorrhaging is not inevitable. A nation that can shoot an errant satellite out of the sky could build a high-productivity, high-wage manufacturing sector that also meets critical national goals such as combating global warming, modernizing infrastructure and maintaining a defense industrial base. Manufacturing and service firms can use a “high-road” production process that harnesses everyone’s knowledge — that of production workers as well as top executives and investors — to achieve innovation, quality and quick responses to unexpected situations.

How do we get there? Start with more investment in education, training, and research and development. Yet education alone will not allow firms to overcome the market failures that block adoption of efficient, high-road practices. Nor will it reinvigorate income growth, which for the median college-educated man has risen only half a percent annually since 1973. Similarly, increased R&D spending by itself won’t get innovative products to market. Fortunately, high-road producers excel at overcoming the obstacles that have hampered American firms’ ability to move from lab to production.

Sens. Clinton and Obama favor investments in infrastructure and alternative energy, which would create many jobs and serve national needs. (Creating renewable capacity to meet 25 percent of U.S. electricity demand would reduce dependence on foreign oil, cut carbon emissions and employ 927,000 people.) Their trade policies begin to provide workers and the environment with protections like those already enjoyed by owners of intellectual property. Broad access to health care would greatly benefit manufacturers, not to mention the rest of the economy.

But more is needed. Competing with low-wage nations is not as daunting as one might think; research by the Michigan Manufacturing Technology Center suggests that most small manufacturers have costs within 20 percent of their Chinese competitors’. The federal Manufacturing Extension Partnership helps bridge this gap by teaching companies to develop new products, find new markets and operate more efficiently — and it pays for itself in increased tax revenue from the firms it helps. Yet the Bush administration wants to end this program, while Clinton proposes only to retain the current budget of $90 million and Obama does not mention it at all. We should triple the program’s funding — a step that would cost only $300 million per year.

On a larger scale, rebuilding our neglected infrastructure would create jobs while making the United States more competitive. Public infrastructure — roads, bridges, sewers — is crucial for private productivity. Right now, 27 percent of bridges are structurally deficient and need immediate attention. Future infrastructure needs will change as we take seriously the costs of environmental degradation, with fewer highway expansions and more public transit, for example. We need to get started on this work, which has substantial job-creation potential — as many as 47,000 jobs per billion dollars spent, according to the Economic Policy Institute.

Why not let all the manufacturing jobs disappear and have an economy of just eBays and Googles? Because even the most modern economies cannot thrive without making things. We need manufacturing expertise to cope with events that might present huge technical challenges to our habits of daily living (global warming), leave us unable to buy from abroad (wars) or leave us with nothing to sell that others want. Rather than abandon manufacturing, we could make the sector a showcase that leads the way toward higher productivity and better jobs in the economy as a whole.

Good ideas that will help presidential candidates win in Ohio today can also help America win in the global economy. Let’s remember that, long after the votes are counted.

Susan Helper, an economics professor at Case Western Reserve University, is a research associate of the National Bureau of Economic Research. This op-ed is based on research she did for a paper, “Renewing U.S. Manufacturing,” for the Economic Policy Institute’s Agenda for Shared Prosperity.

Susan Helper is economics professor at Case Western Reserve University. This op-ed is based on Dr. Helper’s paper Renewing U.S. Manufacturing: Promoting a High-Road Strategy, written for the Economic Policy Institute’s Agenda for Shared Prosperity.


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